Annual Report on Corporate Responsibility Contents / Corporate Responsibility 334 CONTENTS GUIDE OF THE ANNUAL REPORT ON CORPORATE RESPONSIBILITY 2009 0. Introduction (Pg. 335) 6. Suppliers (Pg. 393) 6.1 Procurement Management System (Pg. 393) 1. Corporate Responsibility in Iberia 6.2 Responsible procurement (Pg. 394) (Pg. 339) 6.3 Supplier payment tools (Pg. 395) 1.1 Corporate Responsibility Framework (Pg. 339) 7. Employees (Pg. 396) 1.2 Impact analysis (Pg. 343) 1.3 External assessment (Pg. 344) 7.1 Workforce and labour relations (Pg. 396) 1.4 Prizes and recognitions obtained in 2009 (Pg. 345) 7.2 Satisfaction, internal communication and motivation (Pg. 398) 2. Stakeholder engagement (Pg. 347) 7.3 Training and development (Pg. 400) 7.4 Employee services: IBpersonas (Pg. 404) 2.1 Public positions (Pg. 351) 7.5 Ethics and Codes of Conduct (Pg. 404) 7.6 Equality opportunity and diversity (Pg. 406) 3. Environment (Pg. 354) 7.7 Work and family reconciliation policies (Pg. 406) 7.8 Health and safety at work (Pg. 407) 3.1 Environmental management in Iberia (Pg. 354) 7.9 Welfare benefits (Pg. 409) 3.2 Flight operations: Climate Change (Pg. 358) 7.10 Corporate citizenship (Pg. 410) 3.3 Flight operations: Local Air Quality (Pg. 363) 7.11 Employment of disabled workers (Pg. 412) 3.4 Noise in the vicinity of the airport (Pg. 364) 3.5 Ground operations: Greenhouse gas emissions (Pg. 366) 8. Society (Pg. 413) 3.6 Ground operations: Consumption of resources (Pg. 369) 3.7 Ground operations: Waste (Pg. 370) 8.1 Millennium development goals (Pg. 414) 3.8 Nature protection (Pg. 371) 8.2 Participation in Associations and Foundations (Pg. 416) 8.3 Responsible investment (Pg. 418) 4. Customers (Pg. 373) Annexes (Pg. 421) 4.1 Iberia passengers: the essence of our existence (Pg. 373) 4.2 Iberia Cargo customers (Pg. 382) 4.3 Iberia Maintenance customers (Pg. 382) 4.4 Iberia Airport Services customers (Pg. 382) 4.5 Guarantees for all our customers (Pg. 383) 5. Shareholders (Pg. 385) 5.1 Performance of the different Iberia businesses in 2009 (Pg. 385) 5.2 Risk management (Pg. 387) 5.3 Fraud prevention and anti-corruption measures (Pg. 388) 5.4 Good Governance (Pg. 388) 5.5 Innovation management (Pg. 389) 5.6 Brand management (Pg. 390) Chairman's Statement 7 CHAIRMAN'S STATEMENT "A difficult year, but strategic for the future of Iberia" 2009, the most important facts and figures of which collapse of world trade. Iberia suffered an 11.6% drop in are set out in detail in this Annual Report, was demand, which clearly reflects the deepness of the unquestionably the worst year that the air transport recession. Even so, there was a slight upturn in the last industry has had to face, which has also been reflected in quarter with a year-on-year growth of 10.5% in traffic. Iberia’s earnings. Nevertheless, I trust that this year will be This drop in demand, together with the lowering of remembered in the history of our company more for the prices owing to the market situation and tough strategic decisions made than for the earnings obtained, competition, had a huge impact on the company’s which we hope will be just a snag in an otherwise revenues, which fell by 19%, this being the factor that outstanding track record. most affected the company’s year-end earnings. According to the International Air Transport In view of the evolution of revenues and the Association (IATA), the losses in 2009 were among the complicated economic environment, the company made a largest ever recorded in this sector, with provisional tremendous effort to reduce its operating costs, cutting estimates in December putting airline accounts some 11 them by 12% over the year, but this was obviously not billion dollars in the red. More than 30 airlines disappeared enough to offset the drop in revenues. This difference or were bought up or taken over. Just in Europe, the air between the drop in revenues and the reduction of transport industry is estimated to have lost 100,000 jobs expenses (19% and 12%, respectively), largely explains our and 100 million passengers. final results, with net losses of 273 million euro, compared Iberia did not escape the adverse effects of the year. with a profit of 32 million in 2008, when the industry was Firstly, both passenger and cargo traffic plummeted. The starting to feel the pinch of the crisis. drop was particularly severe in our Business Class as a Counterbalancing these results, the MRO business result of the crisis and the cuts made by all companies. increased its revenues from third parties by more than 4%, However, the performance of our Business Plus improved closing the year with a profit. Iberia Mantenimiento has in the second half of the year on long-haul routes, with a become a world benchmark in this industry, not only for reduction of just 6%, compared to the 20% experienced in its specific weight in market share -it is among the top 10 the first half of the year. companies in the world- but also for the technical Cargo transport was also hard hit by the severe competence and efficiency of the Iberia MRO workshops. Chairman's Statement 8 The Airports division has also achieved a noteworthy critical year, Iberia has considerable financial strength, its performance. In an extremely complicated environment, accounts being among the healthiest in the sector, with with a drop of 11% in global airport assistance in Spain 1,919 million euro cash and an on-balance-sheet debt of and when most of the companies that are customers of 1,417 million euro at 31 December 2009. Iberia have reduced their flights, this division has managed to close the year almost at breakeven point, after losses of Three major projects for the future almost 20 million euro in the previous year. It has also gained 22 new customers, included in its services area, and At the beginning of this letter, I mentioned that 2009 increased its market share by almost one point in Spain, will probably be remembered in Iberia for the strategic probably the country that has made most headway in the decisions adopted. During the year, impetus has been deregulation of this sector in Europe. given to three major projects that will mark the future of Another of the positive aspects highlighted from last this company: Plan 2012, the planned merger with British year is the company’s fleet utilisation, which has been Airways and the joint operation of North Atlantic routes raised to 10.3 hours a day (block hours per aircraft), up with British Airways and American Airlines. 3.7% year on year. This was achieved by resizing the fleet, These three major projects are designed to achieve withdrawing 10 units, and by cancelling aircraft leases, growth in long-haul operations, reorganise short and postponing deliveries and even temporarily parking some medium haul operations so that the network is covered in units. conditions of sustainability and competitiveness, and take The company also efficiently adjusted capacity to an active role in the progressive consolidation of the demand, maintaining its load factor at similar levels to the industry, guaranteeing Iberia’s position among the leading previous year. We reduced capacity by 6% while traffic airlines worldwide. dropped by 6.2%, so the load factor only fell by two In the short and medium haul, we are aware that we decimals to 79.8%, which is still one of the highest among cannot just stand by and watch the evolution of the European network airlines. market, in which new rivals are trying to push the large Despite that reduction of capacity, the company network airlines, such as Iberia, out of their traditional managed to maintain its market share on the most markets. Consequently, we plan to transform our short strategic routes, those joining Europe to Latin America and and medium haul operations gradually into a competitive Madrid to the rest of Europe. In the former, Iberia is still product that meets the new demands on the market. firm leader, with a market share of 20.1% in 2009, barely In the long haul, Iberia has a clear leadership in routes three decimals less than the previous year; and 23.6% in between Europe and Latin America. We have made Business, on a par with 2008. Between Madrid and Europe, enormous investments in our product, with considerable the market share was 41.6%, up one decimal on the commercial efforts and focussing almost obsessively on previous year. customers, which will enable us to take advantage of Before closing my comments on the economic market growth and corner an increasingly large share of aspects, I must mention the financial health of our that market. company. Despite the normal deterioration in such a Chairman's Statement 9 The agreement between Iberia, American Airlines and Spain, its operating and financial base in the UK and both British Airways to jointly operate the North Atlantic is also the Board of Directors and the Executive Committee will be making progress. This is a vast project involving the joint mixed. If everything goes according to plan, the merger operation of all the routes between Europe and the United will be completed by the end of this year. States, Canada and Mexico. It is also an opportunity for In 2009, in spite of the crisis, Iberia continued to excel Iberia and our customers to compete on equal terms with in its corporate responsibility policy and was one of the other alliances and embrace a market of extraordinary few airlines in the world to be included, for the fourth year possibilities with new destinations to be included in the in succession, in the selective Dow Jones Sustainability network.